Abu Dhabi: The capital of green energy?

While the United States Congress hems and haws over extending relatively modest tax incentives to encourage renewable energy development, Abu Dhabi is spending $15 billion in a drive to make the oil-rich emirate an epicenter of green technology. Called the Masdar Initiative, it’s best known for plans to build Masdar City, a “zero-carbon, zero-waste” urban center.

But Abu Dhabi’s ambitions extend far beyond making Masdar City a showcase for sustainable development, as Masdar Initiative CEO Sultan Ahmed Al Jaber made clear when Green Wombat sat down with him on Tuesday when he was in San Francisco to accept the “Cleantech Leader of the Year” award at the annual Cleantech Forum. “We have decided to establish the Silicon Valley of renewables in Abu Dhabi,” says Al Jaber. “We want to cover the whole value chain - from research to labs to manufacturing to the deployment of technologies.”

To that end, Masdar is collaborating with European and U.S. universities - including MIT and Columbia - to develop a research institute. The Masdar Clean Tech Fund has invested $250 million in renewable energy ventures and Al Jaber, who will be speaking at Fortune’s Brainstorm: Green conference in April, says a second fund is in the works. “We’ll invest wherever the opportunity goes,” he says. “We’re keen on developing renewable energy infrastructure in California; we’re just looking for the right opportunity.”

Masdar City will be a tax-free zone in a bid to lure makers of photovoltaic equipment and other green energy manufacturers. When Al Jaber says Abu Dhabi wants to own the whole supply chain, he means that literally, beginning with polysilicon, the basic building block of solar cells. “We’re looking at manufacturing polysilicon, thin-film for photovoltaics, wind energy components,” he says. “We’re no longer interested in only being a consumer of technology or an off-taker of specific equipment. We want to transform ourselves into a more knowledge-based economy. “

He expects the renewable energy and waste-reduction technologies developed to build Masdar City - its expected population is 50,000 - to be exported to help retrofit existing cities. “A city of this size would require 820 megawatts of power, but we will reduce energy requirements to 220 megawatts from integrating new designs from day one.”

“This city is going to literally re-engineer urban planning,” he claims.

Abu Dhabi’s ambitions will create opportunities for U.S., European and Asian green tech firms and Al Jaber acknowledges that forming the right partnerships will be the biggest challenge in fulfilling the emirate’s green dreams.

But he says he sees no irony in one of the world’s biggest oil-exporting nations going green. The bottom line: it’s all about power and markets.

“Abu Dhabi recognizes that the global energy markets are evolving and are evolving with substantial growth in alternative energy,” Al Jaber says. “It’s only going to go up. Does that make it a threat or an opportunity? It’s a great opportunity if we invest in it now.”